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Friday, March 09, 2018

Dawn of a New Era - The Changing CV Landscape


29th March 2017 - The day that no soul, if it had even an iota of exposure to Indian Automobile Industry, will ever forget . This was the day when virtually every Indian Automobile Manufacturer's plant came to a stand still and the Policy Paralysis again kicked in. This was the least of what NDA Govt., which is known for its business friendly atmosphere, could have expected. 

Honorable Supreme Court of India banned the sale of outgoing BSIII emission compliant vehicles with immediate effect and gave a window of just 2 days until 31st March to sell off the inventory pileup of over 15000 Cr - Effectively 2 months worth of stock for commercial vehicles industry.

As if that wasn't enough, CV & Two Wheeler manufacturers were caught on the back foot on the preparedness for BSIV Emissions compliant products, wherein no breather was available to upgrade & then stabilize their production lines.

Now, eleven months since the turmoil Indian CV Space has come a long way leaving behind the losses accumulated in FY1617.

After the introduction of BSIV emission norms every quarter of the FY17-18 saw a different challenge ranging from vehicle STA approvals across the country for newly launched BSIV vehicles in Q1 to Product Establishment and counter strategies by OEMs with a question - "Who is Placed better?"

•Q2 & Q3 of FY1617 witnessed an increased industrial output coupled with further strictness on practice of Overloading leading to spurt in TIV and higher demand for high payload vehicles.

•This also saw an era of shifting preferences wherein a given section of price sensitive customers scouted for CVs with lower price tags and yet another set of customers going in for technically advanced vehicles. Yes, the advanced technology came at a premium though. These were the customers who were tech savvy enough to fully understand the impact of the two BSIV technologies SCR and EGR available in the Indian CV Space. Debate upon the superiority of SCR vs EGR is still On.

• Growth in 49T Segment within India saw a boom and with rated load becoming the norm, vehicles fitted with Bell Crank suspension gained momentum & are contributing to roughly 60% of the 49T sales.

•TIV in 37T Segment saw an upswing with exponential growth cannibalizing the decade old hot favorites 25T & 31T Segment.

•Tippers though had not been on the free run as majority of the surface transportation of Construction material shifted to 37T & 49T segments.

•No one would have had ever imagined and expected this phenomenal growth in Q1 when the industry tanked to negative 30% in the last FY.
      In totality if we consider the number of axles getting rolled out of the factories this FY the overall growth is even way higher. All thanks to the Govt's focus on Road and Infra Projects.

•With the Government at the center hell-bound to bring a turnaround in the country, Road Projects, which were held up for a long time, got revived, Check Posts were abolished for smoother passage across state borders. 

•There are always two sides of the coin. This changing landscape coupled with demand of high tonnage vehicles has now led to the change in ownership periods. Increased acquisition cost of the vehicle owing to BSIV Emission norms has led to higher fixed cost with stressed disposable income in hand leading to higher payback time.

•Transporters are now vowing to ply the vehicles for periods extending beyond 6 years which was 4-5 years few years back that led to CVs changing hands 3-4 times in there lifetime.

•Due to higher plying periods/rated load applications need for more reliable vehicles kicks in. This is evident from the fact that Tata Motors increased Warranty on their Trucks to 6 Years from 4 years and maintaining supremacy in the CV industry due to which it has been holding the no 1 position for ages now.

•Since the average age of the vehicles in any transporters' fleet is bound to increase, and driver shortages further taking the toll, transporters are looking for value for money features at relatively lower cost in trucks much inline with what we see in cars. Gone are the days when Transporter/Driver settled for not so good looking Trucks and now are considering comforts like AC, Cruise Controls, Projector Head Lamps, Reverse Parking Cameras & Sensors for their trucks.


All said and done still it's long way to go and probably the best is yet to come.







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